Can anyone help me understand this better?
Expected= as determined by IRP Unexpected= manager expectations ??? I have no idea.
Expect - as predicted by the interest curve Unexpected - unexpected change in the curve, parallel shift/twist not sure either.
Expected interest rate effect = Expected return on portfolio based on the implied forward rates in the term structure of Treasuries calculated at the beginning of the period Unexpected interest rate effect = Difference between actual realized return on the portfolio and the expected interest rate effect
Expected = as predicted Unexpected = actual portfolio performance vs expectations
Expected interest rate changes tend to be derived from the forward yield curve, using the simple expectations theory. However, you could in principle have some model incorporating liquidity preference theory and back these things out (they almost certainly wouldn’t test that).
^Dude. Stick to the LOS, man. I’ve got enough load already 